CMS Proposed Payment Cut to Home Health Agencies

Proposed Home Health Payments

Part of the reason for the decrease is attributed to a permanent adjustment in behavior assumptions.

The 2024 Home Health Prospective Payment System Rate Update proposed rule released on June 30 revealed that Home Health Agencies will experience a 2.2% payment decrease in 2024 compared to 2023, partly due to a permanent behavior assumption adjustment. CMS issued a 2.7% payment increase for 2024, but this was offset by a 5.1% decrease in permanent behavior assumption adjustment and another 0.2% decrease due to the fixed-dollar loss ratio, as per the statute.

CMS found that Medicare paid more under the new system than it would have under the old system, using updated 2022 claims and the methodology finalized in the 2023 final rule. As a result, CMS is proposing an additional permanent adjustment percentage of -5.653% in 2024 to address the differences in aggregate expenditures.

 Why this Matters

The proposed rule suggests a permanent, prospective adjustment to the CY 2024 home health payment rate to account for the impact of the implementation of the Patient-Driven Groupings Model (PDGM). This adjustment aims to address the differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the implementation of the model and 30-day unit of payment as required by the Bipartisan Budget Act of 2018.

For CY 2023, CMS had previously finalized a permanent adjustment that was half of the estimated required permanent adjustment. Additionally, CMS is proposing several changes, including rebasing and revising the home health market basket, revising the labor-related share, recalibrating the PDGM case-mix weights, updating the low utilization payment adjustment thresholds, functional impairment levels, and comorbidity adjustment subgroups for 2024.

The proposed rule also includes regulations to implement payment for items and services under two new benefits: lymphedema compression treatment items and home intravenous immune globulin, along with hospice-related enrollment provisions that scrutinize hospice owners more closely to ensure they do not pose program integrity risks.

CMS believes that these actions would enhance patient care and protect the Medicare program’s sustainability for future generations.

The Larger Trend

Since Jan. 1, 2020, CMS has implemented the home health PDGM and a 30-day unit of payment, as required and amended by the Bipartisan Budget Act of 2018. The PDGM aims to align payments with patient care needs, particularly for clinically complex beneficiaries. The law required CMS to make assumptions about behavior changes that could occur due to the implementation of the 30-day unit of payment and the model.

In the CY 2019 final rule, CMS finalized three behavior assumptions, including clinical group coding, comorbidity coding, and low utilization adjustment threshold. The law also mandates CMS to annually determine the impact of differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures, starting from 2020 and ending with 2026. CMS must make temporary and permanent increases or decreases, as necessary, to the 30-day payment amount to offset such increases or decreases.

For more information on the Home Health Prospective Payment System, the Home Health Patient-Driven Groupings Model, and the expanded Home Health Value-Based Purchasing Model, CMS has released additional details on its website.